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Last week on Methods of Prosperity, John Pierpont Morgan had already saved America from default once before he acquired Carnegie Steel to form the United States Steel Corporation, with a staggering capitalization of $1.4 billion. JP Morgan acquired Carnegie Steel for $493 million in 1901. Today that would be equivalent to somewhere between 15 to 17 billion dollars. Later that year, he formed the Northern Securities Company to consolidate the railroad industry. In 1904, the U.S. Supreme Court ruled that it was a monopoly which violated the Sherman Antitrust Act of 1890. The Northern Securities Company was dissolved by the U.S. government in 1904. Finally, Morgan organized collective action to stabilize the financial system during the Panic of 1907. He had a significant influence in shaping the American financial landscape.
The following is Methods of Prosperity newsletter number 13. It was originally deployed September 14, 2023. As of May 23, 2024, original subscribers have received up to issue number 49 (Sam Walton, continued).
Part 13: Mayer Amschel Rothschild (1744-1812)
TL;DR
In 1452, Frankfurt’s Jewish community faced severe restrictions under the Judensatzungen, prohibiting landownership, certain professions, and living outside the Jewish quarter. By 1460, they were compelled to reside in a ghetto, as decreed by Emperor Frederick III. Amidst these constraints, Mayer Amschel Rothschild was born in 1744 in the confined Judengasse. Despite the limitations, his early exposure to finance through his father, a moneychanger, and later through an apprenticeship in Hannover, laid the groundwork for his future success.
Mayer Amschel Rothschild eventually became a significant figure in banking, initially through dealing in rare coins and later as a court factor to Prince Wilhelm I of Hesse. His marriage in 1770 to Gutle Schnapper further solidified his financial standing. Together, they had 20 children, half of whom survived to adulthood; five sons would go on to expand the Rothschild banking empire across Europe.
During the Napoleonic Wars, Rothschild’s financial acumen became invaluable. In 1806, faced with the invasion of Hesse by Napoleon, Wilhelm IX entrusted Rothschild with safeguarding his fortune. This task was expertly managed by Rothschild and his sons, notably through investments in British securities by his son Nathan, greatly enhancing the family’s wealth and establishing their reputation for trustworthiness and financial prowess.
Key lessons:
Always be in proximity to money.
Have a lot of kids.
Go all-in ASAP.
Marry up.
In 1452, the Jews of Frankfurt were forced to accept a set of restrictions known as the Judensatzungen. These restrictions included a ban on owning land, holding certain professions, and living outside of the Jewish quarter. In 1460, the emperor Frederick III issued a decree that forced the Jews of Frankfurt to live in a ghetto. The ghetto was a walled-off area of the city where the Jews were required to live and work.
Mayer Amschel Rothschild was born in 1744 in the Judengasse (Jews Lane), the Jewish ghetto of Frankfurt, Holy Roman Empire (now Germany), one of eight children of Amschel Moses Rothschild and his wife, Schönche Rothschild. In those days, Jews were prohibited from owning land or farming, but they were allowed to buy and sell. It wasn’t unusual for Jews to be money lenders. His father, Amschel Moses Rothschild, was a moneychanger and trader.
The Judengasse was a confined area of a crescent shape along the city walls. The city was destroyed at the end of WWII. Only a few hundred meters long, Judengasse crammed in 3,000 Jewish people. Imagine how insufferable the poverty and persecution was. There were three gates that remained locked during Christian religious holidays, Sundays, and every night. The Jews were officially forbidden from leaving the area at these times, and Christians were also discouraged from entering.
Escape from the terrible conditions of the Jewish ghetto was unlikely. Until one day, in 1756, twelve year old Mayer Amschel Rothschild is given the chance to escape. His parents were now dead. They died of smallpox, and his other relatives couldn’t afford to take care of him. But with their help, Mayer Amschel secured an apprenticeship under Jacob Wolf Oppenheimer, at the banking firm of Simon Wolf Oppenheimer in Hannover, in 1757, where he acquired useful knowledge in foreign trade and currency exchange. This was a rare chance, considering the challenges. It was illegal for Jews to travel through Germany without obtaining the required permit.
Upon returning from Hannover, He became a dealer in rare coins and won the patronage of the immensely wealthy Crown Prince Wilhelm I of Hesse (1743-1821). Of all Mayer Amschel’s clients, Prince William of Hesse-Kassel was the most influential. In 1769, Mayer Amschel gained the title of “Hoffaktor” to Prince William, which was a significant appointment. Wilhelm I later became Wilhelm IX, Landgrave of Hesse-Kassel on the death of his father in 1785, and Mayer Amschel Rothschild was now managing all finances. As a court factor to the German Landgraves of Hesse-Kassel in the Free City of Frankfurt, Holy Roman Empire, Rothschild established his international banking business.
One under-utilized method of prosperity is to marry up. Mayer Amschel Rothschild was married to Gutle Schnapper in 1770. She was born in Frankfurt am Main, Germany, to one of the few financially well-off families. Her father was a moneylender and court factor for the principality of Saxony-Meiningen. In those days, the bride’s father gave a dowry to the groom as part of the marriage arrangement. For the newlywed Rothschilds, this transfer of wealth was 2,400 Gilders. This was equivalent to the annual salary of a well-paid civil servant of the court. They had 20 children together, of whom 10 survived to adulthood.
Back then, let’s assume it was not unusual to have that many children. Frankly, the more babies a woman has the better for the survival of your family genes. Fifty percent of their children didn’t survive to adulthood! That’s probably why the Torah commands us to be fruitful and multiply, doesn’t it? Incidentally, only the men in the family were allowed to run the House of Rothschild’s business. Five of their sons went on to establish Rothschild banking branches in London, Paris, Vienna, Naples, and Frankfurt.
When Rothschild was 59 years old, the Napoleonic Wars began. In 1805, Prussia and Russia formed an alliance against France. Napoleon defeated the Prussian and Russian armies at the Battle of Austerlitz in December 1805. After the battle, Prussia was forced to withdraw from the alliance and to sue for peace. Wilhelm IX of Hesse was a close ally of Prussia. He had provided financial and military support to the Prussian war effort. In May 1806, the British government set up a naval blockade of the French coasts in an effort to weaken the French economy. Napoleon invaded Hesse in October 1806 in response to Wilhelm's support for Prussia. Napoleon issued the Berlin Decree on 21 November 1806 in retaliation against the British naval blockade. As a large-scale embargo by Napoleon Bonaparte against the British Empire was intended to weaken the British economy and force it to negotiate peace with France. Napoleon hoped that by cutting off British trade with the European continent, he would deprive Britain of its source of income and force it to give up its colonies and trading posts around the world.
Napoleon invaded Hesse in response to Wilhelm IX's support for Prussia. On the advance of Napoleon’s army, Wilhelm IX was forced to go into exile, but needed to conceal his coffers from the occupying forces. Guess who was chosen to make this happen? Mayer Amschel Rothschild, of course. The House of Rothschild now had a network in which Wilhelm IX could anonymously move and invest his fortune. Mayer turned to his son, Nathan, in London. Nathan invested £550,000 of Wilhelm IX's funds in British government securities and bullion. These investments proved extremely lucrative and, by the time Wilhelm IX returned from exile, had accrued considerable interest. The Rothschilds’ reputation for trustworthiness and astute financial management was firmly established.
To be continued…
I like you,
– Sean Allen Fenn
